Problem 3:Airway Express has an evening flight from LA to NY with an average of 80 passengers and a return flight the next afternoon with an average of 50 passengers. The plane makes no other trip. The charge for the plane remaining in NY overnight is $1,200 and would be zero in LA. The airline is contemplating eliminating the night flight out of LA and replacing it with a morning flight. The estimated number of passengers is 70 in the morning and 50 in the return afternoon flight. The one-way ticket for any flight is $200. The operating cost of the plane for each flight is $11,000. The fixed cost for the plane is $3,000 per day whether it flies or not.
a)Should the airline replace its night from LA with a morning flight?
b)Should the airline remain in business?
Instructor instructions: (a) calculate and compare the profit under each flight & (b) the evening flight with the return flight the next afternoon is counted as 1 day, not 2 days.